WTI Advances to Two-Week High as U.S. Inventories Decline

Jan. 16 (Bloomberg) -- West Texas Intermediate advanced to
match a two-week high after the U.S., the world’s largest crude
consumer, reported a larger-than-forecast drop in inventories.

Futures rose as much as 0.5 percent, reversing earlier
losses. U.S. crude stockpiles slid by 7.66 million barrels to
350.2 million in the seven days ended Jan. 10, according to data
yesterday from the Energy Information Administration. That was
more than five times a 1.3 million drop forecast in a Bloomberg
News survey. OPEC oil production fell to the lowest level since
May 2011, while the organization forecast demand for its crude
this year will remain below the group’s agreed output target.

“WTI is simply extending yesterday’s gains when it was
propped higher by a large draw in U.S. crude oil stocks that was
not offset by a commensurate rise in product stocks,” Harry
Tchilinguirian, a London-based analyst at BNP Paribas SA, said
today by e-mail.

WTI for February delivery climbed as much as 47 cents to
$94.64 a barrel in electronic trading on the New York Mercantile
Exchange. It was at $94.19 as of 1:30 p.m. London time. The
volume of all futures traded was 11 percent below the average
for the past 100 days, according to data compiled by Bloomberg.

Brent for February settlement, which expires today, fell 40
cents to $106.73 a barrel on the London-based ICE Futures Europe
exchange. The more-active March contract fell 34 cents to
$105.93. The European benchmark crude was at a premium of $12.52
to WTI, compared with $12.66 yesterday.

‘Massive Draws’

Crude inventories shrank as imports decreased 13 percent
last week, the most since September 2012, according to the EIA
report. Stockpiles at Cushing, Oklahoma, the largest U.S. oil-storage hub and the delivery point for WTI futures, expanded by
145,000 barrels to 40.9 million.

Distillate supplies, including heating oil and diesel,
declined 1.02 million barrels, said the EIA, the Energy
Department’s statistical arm. Supplies were projected to have
climbed by 1.25 million, according to the median estimate of 11
analysts surveyed by Bloomberg.

The Organization of Petroleum Exporting Countries,
responsible for 40 percent of the world’s oil supply, said
output from its 12 members slid by 20,000 barrels a day to 29.44
million a day in December amid declines in Iraq and Saudi
Arabia. That’s less than the average of 29.6 million a day the
group predicts will be required in 2014 and below the 30 million
ceiling it reaffirmed in December.

Sharara Field

In Libya, operations have returned to normal at the Sharara
field as protesters are satisfied with the government’s response
to their demands, said Mustafa Lamin, a spokesman for the group.
The country’s production was 570,000 barrels a day yesterday,
Mohamed Elharari, a spokesman for state-run National Oil Corp.,
said by phone from Tripoli today. Libya holds Africa’s biggest
crude reserves.

Europe is days from suspending a ban on reinsurance for
tankers hauling Iranian oil, a measure that helped cut crude
exports from the country by more than 50 percent, the
International Group of P&I Clubs said. The relaxation will take
effect on Jan. 20 and last for at least six months, Andrew
Bardot, the executive officer of the International Group, said
by e-mail today.

“The sanctions on oil are not lifted, only sanctions
around transportation and insurance will be suspended,”
Abhishek Deshpande, an analyst at Natixis SA, said in an e-mail.
“To some extent we will see some increase in Iranian oil
exports to countries including India, China, South Africa, South
Korea, Japan. But they will all stick to the U.S.-led quotas on
Iranian oil imports.”

WTI has technical support along the so-called neckline of a
head-and-shoulders formation, at about $91.90 a barrel today,
according to data compiled by Bloomberg. Futures are rebounding
from this level this week. Buy orders tend to be clustered
around chart-support levels.